CPSU Solar Policy in India

The Indian solar manufacturing industry has been in doldrums ever since the domestic content requirements (DCR) was removed from domestic solar tenders due to WTO restrictions. Despite large capacities of solar modules, utilization was low as low-cost imports from China have virtually captured the whole Indian solar market. Though the government has been trying to support in an ad-hoc manner, the incentives are too small and scattered to make much of an effect. Draft policies on supporting manufacturing have not been notified while piecemeal efforts like the SECI tenders or the safeguard duties have failed.

Also, read India to Empanel Solar Manufacturers, as SD and Tenders fail to Gain Traction

Finally, the government has come out with a substantial policy that will support the industry in terms of a 12 GW CPSU solar policy that mandates that the whole 12 GW will be bought from Indian made solar cells and panels. The government is also giving a Viability Gap Funding support of $1.2 billion which translates into 10 cents/watt or around INR 60 lakhs/MW. This is a huge incentive for CPSUs (central public sector undertakings) since it can cover almost 20% of the total cost of the solar power plant in the form of the VGF. This will allow the flailing Indian solar cell and module manufacturers to finally get some domestic orders in order to run their plants. They will also be able to sell at a premium since there is INR 70 lakhs/MW of incentive which means that they can sell at a higher price to CPSUs.

While the policy implementation will take a year or more as CPSUs finalize plans for building solar power plants and then tender, but the tailwinds of this policy are already buoying the spirits of the large solar domestic players such as Waaree, Adani, Vikram and Tatas who have large capacities and can take advantage of this policy given their scale. If the policy is implemented there is no doubt that there will be fresh investments in the manufacturing space as the solar cell capacities are very low in order to service their orders. A number of foreign companies had earlier committed to set up large plants in India but all of these plans have remained on the drawing board as it made sense to import solar panels rather than “Make in India”. This Holy Grail in the form of the CPSU scheme is the most solid effort to date in terms of promoting solar manufacturing in India.